Using Mediation: Eliminate Risk and Conserve Litigation Expenses

By Larry Demarcay

Monday, April 22, 2013

When doing business in the maritime industry, someone will inevitably file a legal claim against your company, or you will file a claim against someone else. Although litigation is always good for your legal team, it is often not good for the litigants. Litigation forces a company to utilize resources that could be working on more productive areas of your business. While the litigation process progresses, you will have to use your employees’ time to respond to written discovery requests, participate in the deposition process, all while paying your legal team’s attorney fees and costs. As such, in many cases, it makes sense to try to resolve the claim short of having the matter evaluated by the judge or a jury. Mediation has proven to be an effective tool in resolving legal conflicts.

The Benefits of Mediation
The cooperative resolution of a legal claim can be advantageous to your company for several reasons. For starters, you can wrap the claim up without continuing to incur legal costs and expenses. Secondly, allowing a judge or jury to decide the fate of your claim involves risk due to the uncertainty associated by having a third party evaluate your case. Beyond this, you can exert some control over the outcome of the litigation and try to shape a resolution that helps your company. Lastly, it prevents the court from making law that may not bode well for either your company or the industry in the future.

What is Mediation?
Before you can make an educated decision as to whether to mediate a claim, it is important to understand what mediation is. Essentially, mediation is a voluntary process where parties to a legal dispute attempt to negotiate the mutual resolution of a claim using a neutral third party to assist in the process of finding a mutually agreed upon settlement. The mediator does not take sides and will work with both parties to try to reach a compromise. In fact, if a mediator does his job well, both sides will be happy that the claim has resolved while not being entirely happy with the outcome.
Mediation is confidential and non-binding. As such, the mediator cannot force you to accept any compromise and anything that is discussed during the mediation cannot be used as evidence during the trial of the matter. For example, if you concede a contentious point in an effort to reach a resolution, and the matter does not settle, you are still free to dispute the point as if it was never addressed during the mediation.
Mediation can be scheduled at any time; from the first notice of the claim all the way to after trial judgment is on appeal. However, for the process to be effective, both parties need to have a good handle on the facts so that reasonable negotiations can occur. The process works best after a reasonable amount of fact discovery is completed but before the parties incur significant fees and expenses on the trial preparation process. Mediations scheduled too early in the process often fail because the parties do not fully understand the factual positions. Mediations that are scheduled too late are often ineffective if the parties are prepared for trial and the costs associated with forging on to trial have already been incurred. Trial preparation expense often serves as a motivation for reaching a resolution.

The Process
The mediation process is usually started by the attorneys representing the litigants after the case is in a position to discuss settlement. Mediation can also be required pursuant to a contract between the parties as part of an agreed upon dispute resolution process, usually before suit is filed. Many judges also strongly recommend that mediation be performed prior to the trial of the matter. Although judges cannot force the parties to attend mediation as part of the rules of civil procedure, it is always wise to heed such a suggestion and do your best to resolve the claim at the conference.
Once the parties agree to mediate, the parties must select a mutually agreeable mediator, time and location. Although one would expect that the process should be easy, the parties often have problems working out these details. Although a party’s objection to a mediator or the location may seem ridiculous to others, it is important to work through these objections and reach a compromise for the process to have a chance to resolve the claim. For example, a defendant that does not trust the mediator will be less likely to listen to him with an open mind and agree to put up a reasonable settlement if the mediator points out flaws in the defense. Similarly, a plaintiff that does not trust the mediator will not listen to the mediator when he or she explains that his case is not quite as certain as he or she believes it is. The “buy in” by both parties on the front end is crucial for the success of the process. The parties should also agree on how the mediator should be paid for his services. Ideally, the parties should share the expenses equally, because anyone that is not willing to invest in the mediation is probably not serious about resolving the claim.
Once the mediation is set, the attorneys will prepare confidential position papers that are submitted to the mediator in advance of the mediation. These position papers are not exchanged between the parties and the mediator will not reveal the contents of the papers to the other side. The review of the position papers allows the mediator to understand the case before the mediation begins.
On the day of the mediation, the parties usually begin in a conference room where everyone meets with the mediator. The mediator will introduce himself to the litigants, explain the process and make sure that everyone is willing and ready to begin. Then, each party’s attorney will make an opening presentation stating their position and the reasons why they believe that they are entitled to a big recovery or that they should pay significantly less, depending upon which side that they are on. Once the attorneys are finished, the mediator will often ask the parties if they would like to add something to the presentation. At this time, the plaintiff can take the opportunity to “get it off his chest” and let the defendant know why he or she is upset and the defendant also has an opportunity to say that they are sorry, if the situation warrants such an apology. Many times this discussion can break the ice and allow for productive negotiations when the parties had been at an impasse.
Once the introductions are complete, the negotiation process begins. The process can be long, tedious and frustrating. The mediator will separate the parties into different rooms and shuttle back and forth between the rooms exchanging information and settlement offers. As the parties usually start with unreasonable offers, the day is spent negotiating towards a reasonable settlement number, a dance that is hard to appreciate for a business manager that is used to direct and reasonable negotiations in the commercial setting. During each caucus session, the mediator will listen to the party’s argument as to why their case is so good and then try to explain to you why your case is not as good as you think that it is. The process is frustrating and the mediator’s job is to serve as a devil’s advocate. It is important to keep in mind that he is doing it to both sides. As such, the parties are often not happy with the mediator at the end of the day.

Resolution
If a successful resolution is reached, the mediator will prepare a written agreement stating the terms of the settlement. This simple agreement is usually limited to outlining the payment terms such as the amount of settlement, the timing of the funding for the settlement and, if there is more than one defendant, how the settlement amount will be split among the defendants. Once the settlement is ready for funding, the parties will exchange settlement funds in return for a full release of liability and the parties will file a joint motion to dismiss the suit. At that time, the matter has been fully resolved.
In the event that you are involved in litigation, whether it is a commercial dispute or a personal injury claim, mediation, when scheduled at the right time, is an invaluable tool to use in resolving legal matters prior to trial. Matters settled during mediation are always resolved on terms that are acceptable to the parties. Taking the matter to trial is expensive and the outcome may not be to your liking, despite the strength of your claim and your legal team. Bottom line? Successful mediation of a claim can save your company time, money and eliminate risk.